You’d have to hunt pretty hard to find a worse investment over the last three months than bitcoin.
The electronic currency is down 38% against the US dollar since Dec. 31, making it one of the worst assets that we keep an eye on here at Quartz.
That’s right. By our reckoning bitcoin has declined more than copper, the Russian stock market (Micex), and the Nikkei. It’s even done worse than the official decline of the Argentine peso. Although unofficial black market declines in that currency are much worse.
Of course, it’s no surprise that confidence in the crypto-currency has been crumbling. First of all, unless you were laundering money, dodging taxes or selling drugs, it never really made much sense to use bitcoin as a medium of exchange. It did momentarily make a lot of sense to own bitcoin for a few months. But only because it was going up. In other words, it made sense if you were confident you could flip it to another sucker at a tidy profit.
But the catastrophic collapse a month ago of the Japanese bitcoin exchange Mt. Gox made it painfully clear that bitcoin is not a safe store of value either. (Some $450 million worth of bitcoins somehow disappeared during the implosion of the company.)
In short, bitcoin doesn’t come anywhere near meeting the test of a currency. It’s not a widely accepted medium of exchange. It’s not a reliable store of value. And last week the US Internal Revenue Service (IRS) dealt it a harsh blow by ruling that for tax purposes, bitcoin should be treated like a financial asset such as a share of stock, which will make it almost impossible to use as a currency.
Of course, your ownership share of a share of stock represents a claim on the profits of an actual company. Your ownership of bitcoin, even before the IRS decision, represented, well, that you were a pretty cool, tech-savvy person. In other words, not much.